Question

Problem 4-38 (LO. 1. 2. 3) Alle forms Broad Corporation by transferring and basis of $125,000. Fair market value of $275,000), which is subject to a mortgage $325.000. One month prior to incorporating Broad , borrows $100,000 for personal reasons and Gives the lender a second mortgage on the land, Broadball Corporation issues stock worth $300,000 to Allie and assures the mortgages on the land, If an amount is zero, enter" . What are the tax consequences to Alle and to Broadbill Corporation? bo (6) and 53576) are applicable Allie has a realized gain of 475,000 is recognized. Broadbill Corporation has a basis of 600,000 125,000 basis in the stock 650,000 of which s in the land and Alle has NO Without a provision to the contrary, the transfer of mortgaged property to a controlled corporation could trigger gain to the property transferort the corporation took over the mortgage. This would be consistent with the treatment given in like kind exchanges under 1031. Generally, when liabilities are assumed by another party, the party who is relieved of the debt is treated as having received case b. How would the tax consequences to Allie differ if she had not borrowed the $100.0002 Since only 5 357 is applicable Allie has a recognized gain of 250,000 600,000 in the land and Allie has a s 1 25,000 X basis in the stock. M Broadbill Corporation has a basis of

Answer 1

(b) -- How would the tax consequences to Allie differ if she had not borrowed the $100000?

Answer -

Since only § 357(c) is applicable. Allie has a recognized gain of $250000 ($375000 - $125000). Broadbill Corporation has a basis of $375000 ($125000 + $250000) in the land and Allie has a $0 ($125000 + $250000 - $375000) basis in the stock.